AMC Entertainment Analysis: AMC gives up 14% after offering to sell $250 million in common shares

• AMC Entertainment falls after revealing its plan to sell $250 million in shares.
• The cash would be used to pay off existing debt.
• Kung Fu Panda 4 and Dune: Part 2 are doing well at the box office.
• Support awaits AMC stock at $3.60.

The actions of AMC Entertainment (AMC) They do their thing again. The heavily indebted, once meme-loved movie theater chain is heading to the market to sell another $250 million in stock to pay off its crippling debt load incurred during the height of the Covid pandemic.

AMC shares are down 14%, to $3.73 per share, as of this writing Thursday morning.

AMC Entertainment News

AMC had total debt of $9.1 billion at the end of the fourth quarter of 2023, but $3.7 billion in the most significant net debt ratio once cash on the balance sheet and investments were accounted for.

“We believe that volatility and our current market prices also reflect market and trading dynamics unrelated to our underlying business or macroeconomic or industry fundamentals,” AMC officials wrote in a statement, “and we do not know how long these dynamics will last. “.

In addition to its concerning debt obligations, there is uncertainty surrounding the company's industry. Since the pandemic, crowds have not returned to movie theaters in the same way as before the pandemic.

Two bright spots have been Kung Fu Panda 4 and Dune: Part 2. The former grossed $108 million in the first two weeks of March. Frank Herbert's sci-fi sequel earned $81.5 million in the US and Canada during its opening weekend.

AMC is awaiting a court hearing on May 2, in which a judge will decide whether to finally approve the $3.3 million deal proposed by hedge fund Antara Capital. The hedge fund originally faced a $20 million lawsuit from AMC shareholders for profiting from a short-swing episode in APE holdings.

Forecast on AMC Entertainment

Following the current sell-off, the bulls have little to wait for. AMC is not in a position to drastically reduce its debt and move into a growth phase. In that sense, there are no good fundamentals that can support an uptrend.

Technically, there is no respite in sight for AMC either, aside from the $3.60 support from early February.

AMC stock is moving below the 20- and 50-day simple moving averages (SMA), which just entered a bearish crossover. The Awesome Oscillator is bearish, and the Relative Strength Index (RSI) offers faltering momentum.

AMC Daily Chart